JKX.L Regulatory News (JKX)

6 May 2011

JKX Oil & Gas plc

INTERIM MANAGEMENT STATEMENT

INCLUDING DATA FOR

THE FIRST QUARTER ENDING 31 MARCH 2011

Highlights

Q1 Q1 Change

2011 2010

Production (boepd) 8,910 11,384 -21.7%

Gas Production (MMcfd) 40.0 46.6 -14.2%

Oil Production (bopd) 2,246 3,621 -38.0%

Realised gas price ($ per Mcf) $8.25 $7.39 +11.6%

Realised oil price ($ per barrel) $92.29 $61.60 +49.8%

 JKX Chief Executive, Dr Paul Davies, said:

"We are pleased to be able to report that the successful drilling programme in the period has improved the base production level in Ukraine with Group production currently in excess of 11,000 boepd. Good progress has been made on the final phases of our Russian redevelopment project and we remain on schedule for an autumn start-up.

"The LPG facility components have been delivered on-site in Ukraine and hook-up and commissioning are on-track for a mid-year start-up. Exploration discovery of a new reservoir in Ukraine has opened up the possibility of additional reserves within the current field complex. We are benefitting from strong international oil prices and rising Ukrainian gas prices which are both having a positive impact on Group cash flow."

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Production

Ukraine: Average production in the first quarter was 8,252 boepd comprising 36.6 MMcfd of gas and 2,156 bpd of oil and condensate, a 22% decrease on the average for the first quarter 2010. Production is improving with on-going development drilling, and is currently in excess of 10,500 boepd.

Hungary: Gross production from the Hajdúnánás Field in the first quarter was 1,315 boepd comprising 6.8 MMcfd of gas and 179 bpd of oil and condensate. (JKX share: 50%).

Outlook: We anticipate average production in the second quarter, accounting for the impact of the annual plant shut-down, to be approximately 10,000 boepd.

Ukraine

Development and Workover Activity: First quarter activity focused on recovering oil and gas production in the core area. Infill wells on Molchanovskoye North and step by step development of the Novo-Nikolaevskoye field are the primary targets. In parallel, optimisation of the flowline network is making a worthwhile contribution to production rates.

Two new development wells were completed and two wells worked over in the first quarter

Well M-169 was spudded in 2010 and was completed in March 2011 as a 600m long horizontal well in the Molchanovskoye North Devonian reservoir. It was designed to replace both wells M-151 and M-152 and has been set higher in the reservoir. Initial test production was 5.3 MMcfd with 634 bpd condensate at a flowing wellhead pressure (FWHP) of 594 psi through a 2" choke. Optimisation of the flowlines enabled the gas rate to be increased to 8.1 MMcfd with 260 bcpd.

Development well M-171 was drilled and completed in 29 days with a short (150m) horizontal section in the Devonian sandstone. It is located in the partially depleted southernmost fault block of the Molchanovskoye North Field and is just entering production after testing at 309 bopd with 1.8 MMcfd gas at a FWHP of 406 psi.

The Skytop rig is now completing the N-75 well in the Novo-Nikolaevskoye field at a TD of 1,894m in the Visean reservoir some 260m to the west of the surface location. This will be followed by the N-76 well targeting the same reservoir some 670m to the east of its surface location; both wells are being drilled from the Novo-Nikolaevskoye wellhead cluster close to Sokolova Balka village.

The TW-100 workover rig carried out a recompletion of well M-152 to the Tournasian sandstone in the Molchanovskoye North field in the period but the well failed to produce and will be abandoned. Workover of well I-128 in the Ignatovskoye field involved successful water shut-off and gas lift installation enabling oil production to almost double to 228 bopd with 0.4 MMcfd gas. The workover rig is now conducting fishing operations on well I-106 with a view to restoring production through additional perforations in the Visean carbonate reservoir.

Facilities: Installation of the LPG plant commenced in the period with the arrival of the LPG processing equipment and the construction of the LPG storage and loading facilities. Installation of the processing plant is almost complete and all of the storage tanks are in place. Loading and measurement equipment is now being prepared with tie-ins to the existing process plant taking place during the annual plant shut-down in mid-May. Commissioning can then commence with first production scheduled for mid-year.

On the Elizavetovskoye Field, the hot tap to the nearby gas trunkline has been successfully installed as a pre-requisite to development of the field in 2012.

Russia

Workover Activity: Initial well workover operations in the Koshekhablskoye Field have been completed and focus is now entirely on the installation and completion of the new gas processing facility (GPF).

The Geostream rig re-entered Well-25 on the north flank of the field and recovered the remainder of the tubing. Drilling of the 270m sidetrack into the limestone reservoir kicked-off at 5,490m and reached the planned TD of 5,763m. The completion has been run and preparations are now being made to test the well.

Wells 20, 25 & 27 are expected to provide the initial production for start-up with a combined capacity in excess of 45 MMcfd, comfortably above of the designed GPF capacity of 40 MMcfd. Additional wells will be worked over as needed to maintain the initial plateau production.

Preparation for the sidetrack of the Callovian Well-09 and the deepening of Well-22 to the Callovian sandstone reservoir have been completed by smaller capacity rigs The Geostream rig will return to complete operations on these wells in the fourth quarter, prior to testing.

Development Activity: The main components of the process plant were delivered from Sharjah to the Russian port of Novorossiysk, some 300km from the field, and transported to the site during the period. Installation is now well underway with most of the major components in place and being hooked-up. Completion of the ground works for the drainage and firewater systems have followed in line with the spring thaw and falling water table. Installation and construction of locally sourced equipment and buildings is virtually complete with hook-up to the plant underway. Commissioning commenced in the second quarter.

First commercial gas production remains on-track for the autumn.

Hungary

Development Activity: The Hajdunanas and Gorbehaza fields produce from three wells to a single separator and then via a 14.5 km export line to an existing facility for input to the Hungarian gas pipeline system. Production has been hampered by some water influx but the operator has been able to maintain gross rates of 6.9 MMcfd with 177 bcpd during April. Remedial work is planned for later in the second quarter with the aim of boosting liquids production in particular. JKX holds a 50% equity interest in the field.

Exploration

Ukraine: A downthrown tilted fault block referred to as the "Wedge Zone" separates the Molchanovskoye North and Molchanovskoye Main fields. Exploration well M-170 was drilled to a revised TD of 3,200m, having encountered hydrocarbons at 3,007m and a gas water contact at 3,123m with a net pay of 54m in the Devonian sandstone. A 35m zone was perforated and the maximum rate in a multi-rate flow test was 17.1 MMcfd with 1,719 bpd of condensate at a FWHP of 2,030 psi.

This zone is approximately 400m deeper than any gas or oil found to date in the adjacent Molchanovskoye fields and remapping is now underway to estimate the extent of this reservoir. A second well in the block is tentatively planned for later in 2011. No reserves are currently attributed to this area of the field complex.

Drilling is also planned in the recently acquired extension to the Zaplavskoye exploration licence targeting the Visean sands to the northeast of the Novo-Nikolaevskoye field.

Hungary: Hernad licences: JKX holds a 50% equity interest in the northern Pannonian Basin Hernad licences. The Tiszavasvari-6 well was tested in January after encountering a 300m gross reservoir interval with excellent gas shows below 2,580m. Three reservoir intervals were tested with a maximum rate of 1.5 MMcfd being recorded. The well has been suspended in anticipation of a possible reservoir stimulation programme. A larger tilted fault block structure with amplitude supported Lower Pannonian reservoir intervals lies updip from the first structure and appraisal drilling is scheduled for the second quarter. A further 300 sq km 3D seismic data acquisition is underway in the Jaszsag area to the south of the Hernad II licence.

Nyírseg Licence: JKX farmed into the adjacent Nyírseg licence in late 2008 and now holds a 50% equity interest. The Gorbehaza-1 well has been tied into the Hajdunanas facility and the second well, Gorbehaza-5, has been completed as a water disposal well. No further activity is planned in the licence area.

Veszto Licence: JKX holds a 25% equity interest in a 15.6 sq km part of the Veszto exploration licence in the east Hungarian Pannonian Basin and continues the evaluation of the prospect specific and regional structural model in the light of the extended test results from the Nyekpuszta-2 well. A further well is planned for the third quarter of 2011. In addition to the testing and completion of the Nyekpuszta-2 well, activity under consideration for 2011 includes evaluation of a similar prospect within the Veszto Licence in which JKX has an option to participate.

Turkeve Acreage: JKX entered into a farm-in agreement for drilling of up to seven wells located in the Turkeve area of north east Hungary. Under the terms of the agreement, JKX funds 66.67% of drilling and completion costs to earn 50% of future mining plots formed to develop discoveries, and also funds 75% of pipeline connection costs. There has been one encouraging result out of the six wells drilled to date and a development plan is in preparation.

Bulgaria: JKX holds a 40% interest in the B and B1 Golitza licenses and is operator. The lack of success in the 2010 drilling programme was disappointing. However, JKX and its co-venturers continue to integrate the information from these wells with the 3D seismic in order to high-grade further exploration targets within the Avren Formation.

JKX has a 16% carried interest in the 1,787 sq km Provadia licence operated by Overgas. A 380 km 2D seismic survey is planned for the third quarter of 2011.

Slovakia: JKX holds a 25% equity interest in the Svidnik, Medzilaborce and Snina exploration licences in the Carpathian fold belt in north east Slovakia. Following the 2010 acquisition of a further 150km of 2D seismic data to firm up leads identified in the 2008/2009 surveys, a structure has been confirmed in the vicinity of the Smilno discovery well in the Svidnik licence and planning is underway for drilling an exploration well, possibly in the latter part of 2011. Further regional seismic data acquisition is planned for the second/third quarter of 2011.

ENDS